China falls to third place as U.S. ag export market, USDA says

U.S. food and ag exports to China will fall by $6 billion this fiscal year in the biggest slump in sales since the Sino-U.S. trade war, forecast the Agriculture Department on Wednesday. Mexico and Canada will surpass China as the top customers, while the agricultural trade deficit will widen to $32 billion.

Sales to China this year were estimated at $27.7 billion, which would be the smallest since 2020, “largely due to continued strong soybean and corn competition from Brazil,” said the USDA in its quarterly forecast of food and ag trade. “Compared with FY23, year-to-date U.S. soybean and corn volume shipments to China were down 23% and 67%, respectively, while Brazil’s shipments of these commodities surged.”

Mexico, already the largest source of U.S. food and ag imports, would become the largest export buyer this year, with record purchases of $28.7 billion. Canada, also with record purchases, would be second, at $28.4 billion. The U.S. neighbors usually take a back seat to China in sales.

Overall, U.S. food and ag exports were forecast at $170.5 billion this fiscal year. While that would be the fourth-highest total ever, it would still be down $8.7 billion from last year. Imports were pegged at $202.5 billion, the largest ever and an increase of $7.1 billion from 2023. The $32 billion trade deficit, twice as large as last year, would also be a record. The fiscal year begins each Oct. 1.

“Import growth continues to be supported by a strong U.S. dollar coupled with persistent domestic consumption,” said USDA analysts. Food and ag imports were forecast to rise 3.6% this year, significantly higher than 2023’s rate but below the 6% yearly average in the decade before the pandemic.

The global economy was forecast to grow 3.2% this year, the same rate as last year.

“This steady growth marks a continued resilience following the economic turmoil from 2020 through 2022,” said the USDA. “Nevertheless, several potential barriers to sustained economic growth persist, including the war in Ukraine, intensifying conflicts in the Middle East, China’s economic uncertainty, and shifting weather patterns.”

Agricultural trade with China is declining at the same time that political tensions are rising between the nations. Legislation to limit or prevent Chinese ownership of U.S. farmland is a popular cause in the Farm Belt. Since the start of the Sino-U.S. trade war, U.S. officials have encouraged a diversification of food and ag exports, though there are few large, untapped markets. If the USDA’s forecast proves true, China would account for nearly $1 of every $6 in food and ag export sales this year.

U.S. food and ag exports to China crested at $36.2 billion in fiscal 2022 then dipped to $33.7 billion last year. During the trade war, sales bottomed out at $10.1 billion in 2019 after totaling $21.9 billion in 2017 and $16.4 billion in 2018.

To read the USDA’s quarterly “Outlook for U.S. agricultural trade,” click here.